RBI does its bit, cuts repo & CRR
Bankers believe there’s room to ease loan rates with R18,000 crore being freed up as a result of the latest cut in the CRR. “There will be monetary transmission because our costs will come down,” Aditya Puri, CEO and MD, HDFC Bank, observed at a press conference, while State Bank of India (SBI) chairman Pratip Chaudhuri said that the bank’s asset-liability committee will meet on Wednesday to decide on a rate cut. The good news for small savers is that they will continue to earn what they do now on fixed deposits because banks can’t afford to cut interest rates on these instruments.
Concerns on slowing growth, well below trend, together with the government’s roadmap on fiscal consolidation convinced the central bank to opt for a rate cut, RBI governor D Subbarao said at a press conference. The central bank now expects the economy to grow at just 5.5% in 2012-13 compared with 5.8% earlier. “One of the main considerations for the rate cut was that growth has decelerated and consumption demand, in particular, has slowed,”